Ohio lawmakers on June 30 agreed to increase the state’s sports betting tax from 10% to 20%. The change will come into effect in the fiscal year 2023-24.
The decision was made as the deadline for fiscal adjustments for the coming year approached. Governor Mike DeWine proposed the tax hike six weeks after Ohio legal sports betting launched.
As of the end of May, the state has accrued about $51 million in tax revenue from sportsbooks, fueling the desire to add more money to state coffers.
Ohio sports betting tax rate was relatively low
Despite the increase, the tax rate in Ohio aligns with the wider landscape of sports betting in the United States. The state’s previous rate of 10% was at the lower end of the spectrum compared to other regions with legal sports betting. The increased rate now matches that of Tennessee, the only non-Northeast state with a similarly high rate of 20%. Conversely, states such as New York, where the rate exceeds 50%, are considering reducing their tax rates to increase sportsbook profitability.
The tax rate is not the only aspect of sports betting under discussion in Ohio. State lawmakers are also debating the allocation of sports betting revenue. While an earlier plan suggested the funding of youth sports, the latest budget proposal from the Senate advocates for channeling the revenue to Ohio schools via the state’s school-funding formula, capped at $15 million.
The new fiscal year marks the beginning of a new chapter for Ohio’s sports betting industry. The recent policy changes will undoubtedly shape the landscape and development of this sector in the state, with all eyes keenly observing the impact of these modifications.
Increased tax rate to curb sportsbook promotional spending?
State Rep. Bill Seitz was a sponsor of Ohio’s sports betting legislation and has been against raising the tax rate since Gov. DeWine first proposed the increase in February.
Seitz says the increase is in part meant to decrease the number of sports betting advertisements in the state.
“The governor’s argument, which I didn’t buy for a minute, is ‘Look at how much money these folks are spending on advertising,” Seitz told PlayUSA. “They’re trying to get people hooked on sports gaming and mobile apps. We need to curb the excessive advertising by the mobile app licensees, and how better to do that than double the tax rate.’ ”
Ohio sportsbooks have been fined nearly $1.3 million so far, with major sportsbooks paying six-figure fines for advertising and responsible gambling missteps.
Seitz said the 10% tax rate was initially meant to encourage advertising for the newly regulated — and legal — market.
“The original concept, which I worked on, was that we wanted to keep the tax rate low to convince people to leave their illegal books and go with the legal, regulated entities,” he said. “That was the whole idea. So when you double the tax rate, that’s maybe not the smartest thing to do.”
Part of the agreement to increase the tax was a request by the Ohio House to fund a Study Commission on the Future of Gaming in Ohio. The commission could find that the 20% tax rate is too high and recommend another figure.
